Customer focused low cost leadership strategy
Low cost strategy is centered on the capability of the company to produce and deliver products of competitive quality at lower costs. Cost leadership strategy is much more than cost reduction initiatives that get lot of prominence in strategic planning and review session of any company as a means to improve the bottom line of a company by improving its efficiency. Some companies use their efficient cost structures to protect their markets from the competitors by responding to competitors’ move of making in-roads in the market space by reducing prices. Such reactive response may make a company predominantly inward focused. Positioning - low cost strategy
Better way to strategically position a company on the advantage of cost is to increase market share by transforming from lowest cost producer to lowest cost supplier of products. This way the company translates its cost advantage into price advantage for its customers and thereby improves the market share. The prospect of increasing the market share provides a great opportunity for the company to leverage the economies of scale coupled with the ruthless cost cutting measures it plans to execute. More the competitive space it occupies – which also means that more competitors eliminated – more effective are economies of scale and as a result the costs are driven still lower. When a company is able to transform the efforts of cost reduction into cost advantage for customers the company can be said to be successfully pursuing low cost leadership strategy. Wal-Mart is one company that continuously strives to reduce costs and in the market place it has got the image of supplier of products at the lowest prices. This is how Wal-Mart captures the markets and eliminates the competitors and improves revenues and market share. Economies of scale and efficiency form the core around which Wal-Mart executes its strategy. Companies pursuing cost leadership strategy compare each and...
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